Asic product intervention
CorporateComplianceFinance1/07/2021 12:00:00 AM

Company Law - Full Federal Court upholds first ASIC product intervention order

On 29 June 2021, the Full Federal Court dismissed an application by Cigno Pty Ltd (Cigno) which sought to quash ASIC’s first product intervention order in relation to short term credit.

ASIC made the industry-wide order, ASIC Corporations (Product Intervention Order – Short Term Credit) Instrument 2019/917, on 12 September 2019, to address what it considered to be significant detriment in the short-term credit market particularly in relation to predatory lending and excessive fees and charges for short-term loans. Cigno was one of the market participants identified at that time as engaging in a short-term lending model with excessive fees.

This case against Cigno is the first order made by ASIC under these important new powers.

On 15 April 2020, the Federal Court dismissed Cigno’s application, which alleged that ASIC had made legal errors in making the product intervention order against them and sought to have it quashed.

The Full Federal Court upheld this decision on 29 June 2021, finding in favour of ASIC’s application of the product intervention order provision. In particular, the Court found that, in assessing consumer detriment, ASIC is entitled to consider not just the characteristics of the relevant financial product, but also the particular circumstances under which it is supplied.

What are product intervention orders?

Product intervention orders give ASIC the power to proactively reduce the risk of significant detriment to retail clients from financial products. The powers were introduced by the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019, which inserted a new Pt 7.9A into the Corporations Act. Under Pt 7.9A, ASIC may make a product intervention order if is satisfied that a financial product has, will, or is likely to, cause significant detriment to retail clients ie where a product is not suitable for the financial circumstances of a particular client.

If should be noted that on 24 June 2021, the Treasury Laws Amendment (2021 Measures No 4) Bill 2021, was passed. The Bill provides amendments to ASIC’s product intervention power, in particular, removing ambiguity and ensuring ASIC’s ability to intervene in relation to the costs of a financial and credit product.

Further reading

You can read more about product intervention orders on our Pinpoint platform here.

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Sources: ASIC, 21-151MR Full Federal Court upholds first ASIC product intervention order, [media release], 29 June 2021, accessed 1 July 2021.

Cigno Pty Ltd v Australian Securities and Investments Commission [2021] FCAFC 115, 29 June 2021, accessed 1 July 2021.

ASIC, 19-250MR ASIC makes product intervention order banning short term lending model to protect consumers from predatory lending, [media release], 12 September 2019, accessed 1 July 2021.

ASIC Corporations (Product Intervention Order – Short Term Credit) Instrument 2019/917, 14 September 2019, accessed 1 July 2021.

Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019, 6 April 2019, accessed 1 July 2021.

CCH Pinpoint ®, Product intervention orders, accessed 1 July 2021.